(Solved Homework): Complete the following assignment for Frontier Communications Corporation (FTR) 2 FTR HW.docxPreview the documentView in a new window…

Complete the following assignment for Frontier Communications Corporation (FTR) 2 FTR HW.docx Preview the document View in a new window

1.Locate the Company’s Annual Report (Form 10-K) on their website or http://www.sec.gov/edgar.

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(Solved Homework): Complete the following assignment for Frontier Communications Corporation (FTR) 2 FTR HW.docxPreview the documentView in a new window…

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2.Create a common-size balance sheet in Excel showing data from the 2016 Form 10-K (all percentages must be expressed with at least 2 decimal places).

3.Evaluate the asset, liability, and equity structure, looking for trends and changes in the common-size balance sheet.

4.What concerns would investors and creditors have based only on this information?

5.What additional financial and non-financial information would investors and creditors need in order to make an investment and lending decisions?

Helpful hints:

Go to http://www.sec.gov/edgar/searchedgar/companysearch.html (Links to an external site.)Links to an external site.

Search for Company

Find 10-K

Click on Interactive Data

Click on Financial Statements

Click on “View Excel Document” below the Company name

Click on tab and print each of the financial statements listed above

Use Merrill Lynch’s “How to Read a Financial Report” to help with definitions

Expert Answer

Consolidated Balance Sheets – USD ($) $ in Millions	Dec. 31, 2016	% to Total	Dec. 31, 2015	% to Total	Evaluation–Trend analysis
Current assets:
Cash and cash equivalents	522	1.80%	936	3.46%	Decreased to almost half
Accounts receivable, less allowances of $131 and $57, respectively	938	3.23%	571	2.11%	Slight increase in %
Restricted cash		0.00%	8,444	31.18%	Made NIL in 2016
Prepaid expenses	88	0.30%	100	0.37%	Almost same
Income taxes and other current assets	108	0.37%	80	0.30%	Almost same
Total current assets	1,656	5.71%	10,131	37.41%	Major decrease due to decrease in cash&restricted cash
Property, plant and equipment, net	14,902	51.36%	8,493	31.36%	Increase by more than half
Goodwill	9,674	33.34%	7,166	26.46%	increase by a quarter of 2015 figure
Other intangibles, net	2,662	9.18%	1,143	4.22%	Doubled
Other assets	119	0.41%	151	0.56%	Slight decrease
Total assets	29,013	100.00%	27,084	100.00%
Current liabilities:
Long-term debt due within one year	363	1.25%	384	1.42%	Slight decrease
Accounts payable	698	2.41%	467	1.72%	Increased % to total
Advanced billings	301	1.04%	160	0.59%	Doubled
Accrued other taxes	134	0.46%	87	0.32%	Increased % to total
Accrued interest	437	1.51%	403	1.49%	Very small Increase
Pension and other postretirement benefits	23	0.08%	33	0.12%	Very small decrease
Other current liabilities	488	1.68%	359	1.33%	Slight increase in %
Total current liabilities	2,444	8.42%	1,893	6.99%	Slight increase in %
Deferred income taxes	2,516	8.67%	2,666	9.84%	Slight decrease
Pension and other postretirement benefits	1,602	5.52%	1,163	4.29%	Increased % to total
Other liabilities	372	1.28%	240	0.89%	Increased % to total
Long-term debt	17,560	60.52%	15,508	57.26%	Increased % to total
Equity:
Preferred stock, $0.01 par value (50,000 authorized shares, 11.125%, Series A, 19,250 shares issued and outstanding)
Common stock, $0.25 par value (1,750,000 authorized shares, 1,192,986 issued, and 1,172,553 and 1,168,200 outstanding, at December 31, 2016 and 2015, respectively)	298	1.03%	298	1.10%	Slight decrease
Additional paid-in capital	5,283	18.21%	6,034	22.28%	decreased % to total
Accumulated deficit	(460)	-1.59%	(87)	-0.32%	decreased % to total
Accumulated other comprehensive loss, net of tax	(387)	-1.33%	(353)	-1.30%	decreased % to total
Treasury common stock	(215)	-0.74%	(278)	-1.03%	Increased % to total
Total equity	4,519	15.58%	5,614	20.73%	decreased % to total
Total liabilities and equity	29013	100.00%	27084	100.00%

4.Concerns, investors and creditors will have have based only on this information

It is of concern that

cash is going down(current ratio or liquidity will get affected)

& investments in PPE,goodwill &other intangible assets are increasing–resulting in fixed asset turnover going down

On the liability side,

debt has increased while total equity has decreased , giving a higher debt-equity ratio meaning high interest expenses

5. Financial informations like the above-discussed current & quick ratios & debt/equity ratios are required by the investors and lenders for assessing the repaying capacity as well as the going-concern nature of the company

Non-financial informations like the goodwill or reputation earned by the company ,presence of satisfied and loyal employees ,good work culture and environment,past & present clints,customers & vendors and their continued association with the company–all count for both the potential investors & the lenders

(Solved Homework): Complete the following assignment for Frontier Communications Corporation (FTR) 2 FTR HW.docxPreview the documentView in a new window…

Expert Answer

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